TORONTO, ONTARIO--(Marketwired - Oct. 29, 2013) - EPM Mining Ventures Inc. (TSX VENTURE:EPK)(OTCQX:EPKMF) ("EPM" or the "Company") is pleased to announce the results of a Preliminary Feasibility Study ("PFS") for the production of Sulphate of Potash ("SOP") from its Sevier Lake Playa Sulfate of Potash Project (the "Project") located in southwestern Utah. The PFS was prepared by CH2M HILL Engineers, Inc. ("CH2M HILL"), Agapito Associates, Inc. ("AAI"), and Norwest Corporation ("Norwest").
Lance D'Ambrosio, Chief Executive Officer of EPM, said, "We are very pleased with the completion and positive results of this important study. Through the efforts of a second drilling and fieldwork program, bench-scale testing of important evaporation and other process-related parameters, and significant hydrology modeling and analysis, the PFS highlights and supports the strong fundamentals and potential of our project."
Preliminary Feasibility Study Highlights
The PFS forecasts average annual SOP production of 300,000 metric tonnes (t) with an estimated Net Present Value ("NPV") of $629 million (after tax, inflated, 8% discount rate) and an estimated Internal Rate of Return ("IRR") of 20% (after tax, inflated). The PFS includes an updated Mineral Resource Estimate, which estimate includes 31.486 million tonnes of SOP in the Measured and Indicated categories, a 7% increase from previously published estimates, due primarily to results of recent drilling.
| Economic Indicators |
|
| NPV (pretax, 8%) |
$ 957 M |
| NPV (after tax, 8%) |
$ 629 M |
| IRR (pretax) |
24% |
| IRR (after tax) |
20% |
| Average Annual SOP Production |
300,000 t |
| Mine Life |
30 years |
| Initial Direct Capital Costs |
$ 292 M |
| Initial Indirect Capital Costs |
$ 50 M |
| Initial Capital Contingency |
$ 36 M |
| Operating Cost |
$ 180.91/t |
| Production Royalties (% of gross revenues) |
5.61% |
| Year 3 EBITDA (nameplate production) |
$ 143 M |
| Payback Period (from commencement of production) |
5.5 years |
| Measured & Indicated SOP Resource |
31.486 Mt |
The economic analysis in the PFS is based upon the following assumptions:
- 100% Equity
- Production Ramp-Up over two years, reaching full production in Year 3
- 50,000 tonnes in Year 1
- 100,000 tonnes in Year 2
- 300,000 tonnes in Year 3
- Construction on playa in Preproduction Year 3 ("PP-3")
- Effective tax rate of approximately 29%
The economic analysis was based upon Measured and Indicated Mineral Resources only. No Inferred Resources were included in the analysis. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability.
Although a PFS has been completed, Mineral Reserves will not be established until further verification of the hydrologic models via longer term pilot-testing planned during the Feasibility Study in 2014.
Capital Costs
The total direct capital costs of the Project are estimated to be $292 M, not including indirect costs and contingency, as of 2013. All capital costs in the economic model are inflated by 2% annually beginning in year PP-3. Contingency is 12% of direct capital costs. The capital cost estimate has an accuracy of +25%/-20%.
| Description |
|
| Initial Capital Costs: |
|
| Playa Infrastructure |
$ 49 M |
| Utility Infrastructure |
$ 45 M |
| Plant Facilities & Equipment |
$ 167 M |
| Rail Load-out Facility |
$ 31 M |
| Direct Costs |
$ 292 M |
| Indirect Costs |
$ 50 M |
| Contingency |
$ 36 M |
| Total Initial Capital Costs |
$ 378 M |
| |
|
| Sustaining Capital Costs (LoM) |
$ 199 M |
Operating Costs
The total cash operating costs of the Project are estimated to be $180.91/t as of 2013. All operating costs in the economic model are inflated by 2% annually beginning in year PP-3.
| Description |
Unit Cost |
% of Total |
| Operating Costs: |
|
|
| Labor |
$ 34.76/t |
19% |
| Power |
$ 13.97/t |
8% |
| Natural Gas |
$ 37.57/t |
21% |
| Reagents, Consumables & Maintenance |
$ 40.34/t |
22% |
| Salt Harvest & Haul to Rail |
$ 37.57/t |
21% |
| General & Administrative |
$ 16.70/t |
9% |
| Total |
$ 180.91/t |
100% |
SOP Markets and Price
The Company has conducted extensive research and analysis based on both public and private materials including industry studies, reports, forecasts, and estimates, as well as a market assessment and distribution strategy study commissioned by the Company and prepared by The Parthenon Group ("Parthenon"). This study, titled "SOP Market Assessment, Summary of Findings" (the "Market Study") included both primary and secondary research and focused on market analysis, supply and demand capacity and pricing trends, economic forecasting and modeling, and developed a framework for domestic and international distribution of SOP and magnesium-based minerals. Interviews were conducted with agronomists, wholesalers, distributors, and retailers, both domestically and abroad. Parthenon also completed a comprehensive survey of U.S. farmers that grow chloride-sensitive crops ("Farmer Survey"). Responses to the Farmer Survey provided further definition for domestic SOP usage by region and crop, decision dynamics, as well as barriers and opportunities for increased usage.
Based on the Market Study and the Company's research and analysis, strong SOP demand is observed not only in the emerging agricultural markets of China, India, South America, and Southeast Asia, but also in the established markets of the United States. SOP is the most commonly used potassium-based, chloride-free fertilizer in the world with global demand of an estimated 6 million tonnes. The fertilizer is used on chloride sensitive, high value crops such as fruits, vegetables, and tree nuts. It continues to be priced at a significant premium to muriate of potash ("MOP") and currently sells between approximately $600 to $700/t, depending on location ($595-$600/t FOB Gulf, Argus; $703/t, Compass Minerals Q2 2013 results, converted to metric tonnes [$638/short ton x 1.1023 short ton/t]). By Parthenon's estimates, the global SOP market is expected to grow 4% annually through 2020.
Based on the Parthenon Farmer Survey, the Company anticipates strong future demand potential not only for SOP but also for micronutrients such as sulphur and magnesium, both of which are contained in the Project's brine resource. One of the important outcomes of the Farmer Survey was the need for better end-user education as to the economic benefits of SOP. The Company believes that with additional research, marketing, and educational outreach, greater market potential for SOP may be realized.
The SOP price forecast utilized in the PFS was based upon the 2012 CRU International Ltd. ("CRU") price forecasts of $566/t in 2015, and reaching $721/t in 2020 (inflated at 2% annually thereafter); standard grade product, FOB Vancouver/Portland. Based on (i) the premium for granular and soluble product over standard grade product in the marketplace; (ii) the Company's proposed mix of granular, soluble, and standard grade product; (iii) the Company's estimated mix of domestic and international sales; and the estimated transportation costs between the mine gate and Vancouver/Portland (including port fees); the price forecast used in the economic model represents FOB mine gate (ex-works) pricing, and is estimated to be equal to the prices projected by CRU.
Hydrology
A comprehensive groundwater modeling effort was conducted to support the PFS. The modeling included several variations designed to test different aspects of the conceptual model. Three-dimensional models of the entire playa system were developed in MODFLOW-2005 to characterize stream-playa lake interaction and effects of areal recharge and evaporation rates. This was followed by 3D and 2D models employing MODFLOW-SURFACT, an advanced proprietary version of MODFLOW with the ability to simulate density-dependent flow, and dual-domain transport. The models incorporated layer elevations derived from intercepts logged from over 400 boreholes and wells drilled during the exploration program. Field data incorporated in the models included estimates of hydraulic conductivity and storage coefficient based on hydrophysical and aquifer stress test results employing both wells and trenches. Site-specific estimates of the vertical infiltration rate and evapotranspiration were also obtained. Data from laboratory testing incorporated into the modeling included unsaturated flow properties, saturated hydraulic conductivity, matrix porosity, and solute concentrations.
Initial modeling determined that the target production rate of 0.09 gpm per linear foot of production trench could be met with a total demand of make-up recharge water of 15 cfs +/- 3 cfs. This modeling was followed by numerous 2D flow and transport simulations to characterize the dilution of the brine resource over time, determine optimum trench spacing, and support a cost-benefit analysis of extracting brine from the lower resource zone with deepened trenches versus wells. To construct the 2D models, a one-meter wide north-south profile was cut through the 3-D model so that location-specific layer thicknesses and depths would be preserved. Multiple simulations incorporating trench spacing of 500, 750 and 1000 meters, trench flow rates, and well spacings of 100, 200, 250, and 400 meters were carried out to prototype various designs. Results showed that acceptable brine mass rates could be extracted from two trench phases, based on 1000 meter spacing, followed by well extraction with individual wells spaced at 400 meters individually discharging at approximately 18 gpm.
Engineering Progress
The PFS considered an optimized process flow sheet (the "Process") that is anticipated to provide improved operating benefits and flexibility while maintaining a balance between production, expense, and potential ancillary mineral production. The Process includes solar pond crystallization, flotation, and product crystallization. In support of the Process, the Company completed important thermodynamic modeling and pilot plant testing of pond crystallization. In addition, bench-scale testing was conducted with Hazen Research and Swenson Technologies for the flotation and multiple effect crystallizer circuits. The thermodynamic modeling and subsequent test work confirmed projected plant recoveries of 78%.
The PFS advanced significant engineering efforts in the areas of plant and rail load-out design, civil construction design for all playa infrastructure, and utility/master infrastructure layout and design. The capital cost estimate included budgetary quotes on 93% of all plant mechanical equipment costs.
Ancillary Mineral Products
The PFS only considered SOP production. The Company anticipates completing a Feasibility Study in 2014 that will consider minerals extraction in addition to SOP, including products such as magnesium sulphate, magnesium chloride, sodium sulphate, and possibly lithium. Given the presence of other mineral constituents in the brine resource, ancillary minerals may provide the Company with a source of additional value if such minerals prove to be economic as the result of further studies.
Resource Estimate
The PFS is based upon an updated Mineral Resource Estimate, which was completed by Norwest. The original Mineral Resource Estimate was presented in the Technical Report entitled "Technical Report Mineral Brine Resources of the Sevier Lake Playa, Millard County Utah" with an effective date of May 1, 2012 (the "May 2012 Technical Report") by Mr. Lawrence D. Henchel, P. Geo. of Norwest and found on the SEDAR website (www.sedar.com) for full review). The updated Mineral Resource Estimate is based upon the data collected from the original drilling and exploration program conducted in 2011-2012, as well as a second drilling and exploration program conducted in 2013.
A total of 431 holes were drilled on the Project using a variety of drilling methods from 2011 through 2013. The following brine resource parameters were acquired from drill hole sampling of brine and host sediments:
- Gravimetric moisture content in weight percent
- Specific gravity of brine and solid host sediments
- Cation in mg/l brine for Mg2+, Na+, and K+
- Anion in mg/l brine for Cl- and SO42-
The geometry of the brine aquifer was determined from correlations of drill hole lithologic descriptions, penetrometer results, and moisture content measurements. The estimations of moisture content and brine grade (cations and anions) and specific gravity inputs into a MineSight® 3D block model were influenced by the results of geostatistical analyses of the source drill-hole sample data.
Whetstone Associates, Inc. completed the analysis of data from the hydrogeological and hydrophysical field-testing program and prepared the hydrogeological models of the system. AAI developed the layout of the extraction and recharge system along with the design of the pre-concentration and production ponds.
The estimated brine resource and associated major dissolved cations and anions for the brine aquifer are summarized in tables below. Given that sufficient sulphate is present in the brine to utilize all potassium ions, the mineral equivalent tonnages of K2SO4 and other potential salt compounds that could be created using the available cations and anions within the Sevier Lake Playa brine resource are also listed below.
Brine Mineral Resource Summary and Major Dissolved Cations and Anions
Dated Effective as of October 25, 2013.
| Category |
Brine Resource |
Potassium (K) |
Sulphate (SO4) |
Chlorine (Cl) |
Sodium (Na) |
Magnesium (Mg) |
| Mt |
Wt % |
Mt |
Wt % |
Mt |
Wt % |
Mt |
Wt % |
Mt |
Wt % |
Mt |
| Measured |
1,937 |
0.261 |
5.063 |
2.161 |
41.854 |
8.072 |
156.332 |
6.627 |
128.353 |
0.326 |
6.321 |
| Indicated |
3,755 |
0.241 |
9.036 |
2.009 |
75.414 |
7.175 |
269.411 |
6.353 |
238.533 |
0.308 |
11.546 |
| Measured plus indicated |
5,691 |
0.248 |
14.099 |
2.060 |
117.268 |
7.480 |
425.743 |
6.446 |
366.886 |
0.314 |
17.866 |
| Inferred |
476 |
0.241 |
1.148 |
2.101 |
9.993 |
7.007 |
33.332 |
6.675 |
31.751 |
0.334 |
1.586 |
Potential Mineral Equivalent Compounds from Brine Resource
Dated Effective as of October 25, 2013.
| |
Million Metric Tonnes |
Potash |
Bitterns |
Bitterns |
Salt Cake |
Halite |
| K2SO4 |
MgCl2 |
MgSO4 |
Na2SO4 |
NaCl |
| State |
Measured |
0.376 |
0.416 |
0.526 |
0.384 |
7.524 |
| Indicated |
0.754 |
0.840 |
1.061 |
0.732 |
14.653 |
| Measured plus Indicated |
1.130 |
1.256 |
1.586 |
1.115 |
22.177 |
| Inferred |
0.004 |
0.004 |
0.005 |
0.008 |
0.087 |
| Federal |
Measured |
10.471 |
11.391 |
14.391 |
32.981 |
225.649 |
| Indicated |
16.272 |
17.998 |
22.738 |
53.577 |
346.196 |
| Measured plus Indicated |
26.774 |
29.389 |
37.129 |
86.558 |
571.846 |
| Inferred |
1.212 |
1.259 |
1.591 |
4.389 |
25.889 |
| LUMA |
Measured |
0.497 |
0.657 |
0.830 |
1.067 |
10.492 |
| Indicated |
3.116 |
3.803 |
4.804 |
7.027 |
55.327 |
| Measured plus Indicated |
3.613 |
4.460 |
5.634 |
8.094 |
65.819 |
| Inferred |
1.344 |
1.848 |
2.335 |
3.654 |
25.137 |
| Total |
Measured |
11.344 |
12.464 |
15.746 |
34.432 |
243.666 |
| Indicated |
20.142 |
22.641 |
28.604 |
61.335 |
416.176 |
| Measured plus Indicated |
31.486 |
35.104 |
44.350 |
95.768 |
659.841 |
| Inferred |
2.560 |
3.111 |
3.931 |
8.051 |
51.113 |
The total Measured and Indicated Resource for SOP increased from 29.485 Mt in the May 2012 Technical Report, to 31.486 Mt in the PFS, an increase of approximately 7%, primarily due to the results of the 2013 drilling program.
No claim for Mineral Reserves has been made at this time pending verification of the hydrologic models via longer term pilot-testing planned during the Feasibility Study phase.
Each of the qualified persons shown below has reviewed and approved the scientific and technical disclosures contained in the PFS and in this press release and are independent of the company. Qualified persons have verified the data including sampling, analytical, and test data underlying the information or opinions contained herein. The qualified persons responsible are:
- Mr. Michael D. S. Blois Pr. Eng., QP, (CH2M HILL) is the qualified person responsible for the mineral processing and metallurgical testing, recovery methods, infrastructure, capital cost and operating cost estimates, and the overall preparation of the report.
- Mr. Michael Hardy, P. Eng., (Agapito) is the qualified person responsible for the mining methods.
- Mr. Scott Effner, P.G., Principal Hydrogeologist, (Whetstone Associates Inc) is the qualified person responsible for groundwater modeling.
- Mr. Lawrence D. Henchel, P. Geo., (Norwest) is the qualified person responsible for the resource estimate.
- Mr. David Waite, P.E., (CH2M HILL) is the qualified person responsible for the environmental and permitting sections of the report.
The Company expects to file the completed PFS technical report (the "PFS Technical Report") in accordance with National Instrument 43-101 within 45 days from the date of this Press Release on the SEDAR website (www.sedar.com) as well as on the Company's website (www.epmmining.com).
Conference Call
The Company will host a call at 11:00 am Eastern Time on October 29, 2013 to discuss the PFS results. The Company cordially invites all interested parties to participate in this call. Participants should register 5 to 10 minutes prior to the call.
Call-in details are as follows:
| Call-in Number: +1 888-390-0546 |
| Conference ID: 37215881 |
About EPM Mining Ventures
EPM, through its wholly owned subsidiary Peak Minerals Inc., controls directly or through agreement, mineral leases on more than 124,000 acres on the Sevier Lake Playa property in Millard County, Utah. EPM is targeting the future development and production of SOP, a premium priced fertilizer used with special crops and soil types, through a cost-effective solar evaporation methodology. The Company is currently engaged in engineering and chemical analysis designed to support the completion of a feasibility study.
For more information on the Company, please visit our web site at www.epmmining.com.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Forward-Looking Information
This press release contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, statements related to activities, events or developments that the Company expects or anticipates will or may occur in the future, including, without limitation; statements related to the Company's release of the PFS Technical Report; the economic analysis of the Project; the Feasibility Study; mineral resource estimate; the permitting process; environmental assessments; business strategy; objectives and goals; and exploration of the Sevier Playa Project. Forward-looking information is often identified by the use of words such as "plans", "planning", "planned", "expects" or "looking forward", "does not expect", "continues", "scheduled", "estimates", "forecasts", "intends", "potential", "anticipates", "does not anticipate", or "belief", or describes a "goal", or variation of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking information is based on a number of factors and assumptions made by management and considered reasonable at the time such information is provided. Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking information. The PFS is, by definition, preliminary in nature and should be considered speculative. It is based upon a process flow sheet that may change, which would impact all costs and estimates. Operating Costs for the Project were based upon assumptions including future energy costs, natural gas costs, water costs, labor, and other variables that are likely to change. Capital Costs were based upon a list of equipment thought to be necessary for production. SOP price forecasts were based upon third-party estimates and management assumptions that may change due to market dynamics. The mineral resource estimates were based upon assumptions outlined in the "Resource Estimate" section. Some figures were calculated using a factor to convert short tons to metric tonnes. Changes in estimated costs to acquire, construct, install, or operate the equipment, or changes in projected pricing, may adversely impact project economics. Among other factors, the Company's inability to complete further mineral resource and mineral reserve estimates; the inability to complete the PFS Technical Report or Feasibility Study; the inability to obtain sufficient recharge; the inability to anticipate changes in brine volume or grade due to recharge or other factors; changes to the economic analysis; the failure to obtain necessary permits to explore and develop the Sevier Playa Project; environmental issues or delays; inability to successfully complete additional drilling at the Sevier Playa Project; factors disclosed in the Company's current Management's Discussion and Analysis; as well as information contained in other public disclosure documents available on SEDAR at www.sedar.com may adversely impact the Project. Although EPM has attempted to identify important factors that could cause actual actions, events, or results to differ materially from those described in the forward-looking information, there may be other factors that cause actions, events, or results not to be as anticipated, estimated, or intended. There can be no assurance that forward-looking information will prove to be accurate. The forward-looking information contained herein is presented for the purposes of assisting investors in understanding the Company's plan, objectives, and goals and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on forward-looking information. EPM does not undertake to update any forward-looking information, except in accordance with applicable securities laws.